China’s coal plant water grab – and why it’s bad news for Australia

Greenpeace has released an expose detailing an extraordinary “water grab” by the world’s biggest coal company, Chinese state-owned giant Shenhua Group. The culprit is a controversial coal-to-liquids plant the company is operating in Inner Mongolia. The report Thirsty Coal 2: Shenhua’s Water Grab is the second in a series exposing the water crisis being driven by coal development in China.

This report echoes the issues raised by HSBC Global Research in their No Water, No Power report of September 2012. That report revealed that eleven Chinese provinces – which together produce 45 per cent of China’s GDP – are already water scarce, a problem being exacerbated by climate change. HSBC found that power, industry and coal mining were likely to be the sectors most affected by government measures to address the problem.

However Greenpeace’s report has found the immediate impacts of the crisis are already being felt by farmers. Greenpeace East Asia’s China office has previously revealed the extent of water consumption necessary to feed 16 large-scale coal power bases during the 12th Five-Year Plan (2011-15), but this is the first time the organisation has directly confronted a Chinese state-owned corporation over its environmental impact.

Shenhua’s water-intensive and highly-polluting coal-to-liquid fuel project in Ulan Moron (Red River in Mongolian) requires an average of 10 tonnes of fresh water to produce one tonne of end product. And for each tonne of end product, the plant produces nine tonnes of carbon dioxide and 4.8 tonnes of wastewater. Since the plant was built, Shenhua have extracted 50 million tonnes of groundwater, equivalent to around 50 gigalitres (billion litres). Wells drilled for the plant have been blamed for causing the groundwater levels to drop up to 100 metres.

Since 2006, according to Greenpeace’s investigation, every artesian well in the region has gone dry and 80,000ha land has been affected by severe water scarcity. Water needed for irrigation has become scarce, production has declined and fields have been abandoned.

The investigation team analysed the industrial wastewater being discharged from the plant, which is being allowed to flow onto the ground and seep into groundwater. Sulphide levels in the samples were almost twice the Chinese national standard, while levels of Benzo(a)pyrene, a hydrocarbon found in coal tar, were 3.3 times the national standard. The analysis revealed as many as 99 different types of semi-volatile organic compounds in the wastewater and sediment samples, including PAHs and PAH derivatives xylene, styrene, dichloromethane and cresol, many of which are considered to be carcinogenic.

A 60-year-old farmer, LI, lives in the worst affected area and spoke to Greenpeace, saying, “In the old days we simply took a shovel, dug a little and there was water,” he says. “Now look at that tree, and the willow, both are dead. Before this sea of sand, the water was about a metre or so deep. You could even swim in it. Now it’s turned into an ocean of dryness.”

Herder HU SHAN’s home is by one of Shenhua’s water pumping stations, which has been in use for ten years. “Not only has my well dried up, not even one blade of grass grows here now,” he says. “This place was once really beautiful. Now, the trees, cattle and sheep are all dying. We are also suffering. And it’s not simply affecting a few of us.”

The unchecked expansion of coal-reliant industries is threatening China’s water resources; it’s a story that is being repeated in other parts of the world. In India, the second biggest coal company in the world, the Government-owned Coal India is proposing new coal plants in drought-stricken Maharashtra.

In Australia, Shenhua are behind the Watermark coal mine proposed for the agricultural lands of the Liverpool Plains in north west NSW. Farmers there have raised concerns about the impact of the project on regional aquifers, and it seems likely to trigger the new section of the Environment Protection Biodiversity Conservation Act, designed to protect water resources from coal mines and coal seam gas.

Meanwhile – as ever – the environmental crunch points and conflicts of the 21st century are being manifested on a huge scale in China. The coal chemical sector is expanding rapidly as part of an energy security strategy: 104 large-scale projects are in the pipeline for approval. Shenhua has just received approval to construct a 4-million tonnes per year coal-to-liquids project in Ningxia province.

In response to water scarcity, as HSBC point out, provincial governments have set and released 2015 water caps, to fit under national quota set by the central government in 2012. These, combined with policies to reduce air pollution and the acceleration of renewable energy, are likely to dramatically change projected coal consumption in China – a reality Australian coal exporters will need to deal with sooner rather than later.

Dr Georgina Woods is a Greenpeace climate campaigner